Can A Personal Loan Boost Your Credit Scores?

By Author: Shreya Eppili
Total Articles: 62
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In life, there are times when you face a financial emergency. In such circumstances, you usually need quick access to money. If you have adequate savings, you can utilise them. However, if you do not want to use them or do not have sufficient savings, such an unexpected financial emergency can be a good reason to opt for a Personal Loan. Such Loans take care of a financially difficult patch in your life.
Besides, handling the Loan can boost your credit scores. Let us learn more about this and explore how it improves scores.
Understanding a Personal Loan
Today, you can enjoy convenience and apply for a Personal Loan online. It is an Unsecured Loan offered by various banks in India. This Loan is easy to understand. You also do not need any collateral to apply for one. Besides, when you select this Loan, you can use it for any financial need. Hence, you can use the borrowed money to buy a gadget, pay for a wedding, cover the vacation expenses, and more.
Boost credit scores with a Personal Loan
A ...
... Personal Loan improves your credit score in the following ways:

Lowers credit utilisation score

Credit utilisation is the sum you owe in relation to the spending limit on your Credit Cards. Most people typically have a mix of revolving lines of credit. This also includes high-interest Credit Cards. Adding a Personal Loan to this lowers the credit utilisation score and positively influences your credit score.

Creates a good payment history

When you pay the monthly instalments of your Personal Loan regularly on time, it enables you to build a good payment history. A solid payment history shows positively on your credit score. Hence, regularly repaying your Loan boosts your credit score. This is especially helpful if your current CIBIL score is lower. Your credit score is high when you borrow a small sum and repay it on time without default.
Nowadays, you can find out the equated monthly instalments you need to pay your bank using a Personal Loan EMI Calculator. This online tool also lets you change the inputs to reach an EMI you can easily pay every month.

Improves your credit mix

The credit mix is the diversification of various Loans or lines of credit you are repaying presently. When you add a Personal Loan to it, it affects your credit score positively. This is because it indicates that you have experience handling various credits.
Conclusion
A Personal Loan is considered a popular financing option for several Indians. It offers multiple benefits and helps overcome an economically tricky patch in your life. Besides, you can utilise a Personal Loan for building a good credit score. This lets you avail yourself of Loans with more favourable terms in the future.